Long
$BANK right now don't forget to thank me later
$BLESS n $1000RATS again in the losers today disappointing 😞
i used to think locking more Bitcoin automatically created more liquidity to borrow against.
then i mapped where the borrowed assets actually come from in
@BabylonLabs_io ’s Trustless Bitcoin Vaults.
On the current public testnet, when a depositor borrows mock USDC, USDT or WBTC, the request moves through the AaveAdapter and the depositor’s position proxy into the Babylon Core Spoke.
But the Core Spoke does not manufacture those tokens or maintain the aggregate liquidity for them.
The borrow continues to the Aave v4 Hub, where lenders supplied the borrowable assets.
The Hub releases the requested tokens, which travel back through the same path to the depositor. When the debt is repaid, the liquidity is restored to the Hub.
that’s the distinction that stuck.
The native BTC determines how much collateral value supports the position.
It does not create the tokens being borrowed.
I like the efficiency there.
The Babylon Core Spoke can use BTC vaults as collateral while drawing borrowable assets from the Hub instead of holding a separate pool of USDC, USDT and WBTC itself.
But collateral capacity and borrowing availability are still different things.
Each asset has Hub-level settings including a draw cap, reserve factor and interest-rate strategy.
The borrow transaction must also leave the depositor’s health factor above 1.0, while the current testnet counts only 78% of the BTC value toward borrowing capacity.
So adding more Bitcoin collateral may increase the debt a position can safely support, but it does not independently add more USDC, USDT or WBTC to the Hub.
The borrowed tokens still come from lender-supplied Hub liquidity and remain subject to the application’s asset and risk parameters.
Does drawing from a shared Hub make native Bitcoin borrowing more capital efficient, or make borrowing dependent on liquidity and limits outside the Bitcoin vault layer??
#baby $BABY